True: compiling is obfuscation, not encryption but, the same argument applies to Java, VB, etc. Even compiled C++ can be disassembled. Anyway, web2py inlines some stuff before bytecode compiling so if you decompile a compiled web2py app you do not get a valid web2py app (because there is no one to one match between modules) unless you tweak it. In most of the cases it is not worth the task.
If your goal is to deny the competition free code, then, yes. But too often people think that they're successfully hiding some trade secret when they're not.